>MAHINDRA & MAHINDRA: January volume – UVs/pick-ups post strong growth, tractor sales muted

Total sales up 12% yoy. M&M’s Jan 2012 sales grew 12% yoy to 64,072 units led primarily by strong UV sales (+15% yoy) as well as strong pick-up sales (+35% yoy) even as tractor sales declined 6% yoy.


Auto segment sales up 22% yoy. Total auto segment sales grew 22% yoy in Jan 2012 to 44,718 units led by strong UV / pick-up segment sales. While UV sales grew 15% yoy to 18,446 units, pick-up sales grew 35% yoy to 13,725 units. Verito sales continued its steady uptrend and posted 37% yoy growth to 1,529 units over a low base. The 3W segment sales remained flat yoy at 6,126 units.


Tractor sales decline 6% yoy. Tractor sales for Jan 2012 declined 6% yoy to 19,354 units. This is the third consecutive month of muted tractor sales. Also alarming was the fact that domestic tractor sales declined 8% yoy to 17,950 units. Exports, however, grew 31% yoy to 1,404 units.


■ Valuation. Disappointing tractor sales for the third month in a row only highlights concerns of a slowdown in the industry which has witnessed strong volume off-take for the last 2 years. Thus, despite strong auto segment volumes, muted tractor offtake may limit overall growth. Also, rising cost pressure is likely to lead to margin pressure going forward. Further, slower growth from other business segments (like IT, Real Estate, ancillary, etc) is expected to keep consolidated earnings muted. Maintain In-Line with a price target of Rs729.


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